"Cash-and-carry" refers to a business model that virtually excludes all credit transactions, requiring up-front payment for all goods and services. Companies with a cash-and-carry business model eliminate accounts receivable from their books and are able to match all sales with actual cash receipts. Cash-and-carry operations were the norm in times long past, and this business model has been making a slow resurgence over the past few years.

Features

Although the core philosophy of a cash-and-carry business model is to accept only hard currency for goods, these types of businesses may still accept credit under specific circumstances. Local cash-and-carry businesses may extend lines of credit to frequent, local customers with whom the business owner can deal personally in the event of nonpayment. A cash-and-carry business model is designed to reduce the risks associated with offering lenient credit to any customer who walks in the door, but business owners can still use their discretion to offer credit on a case-by-case basis.

History

Several generations of Americans have been born into a world where credit cards are accepted nearly anywhere, but this was not always the case. A hard-currency transaction is the most time-honored trade method next to a barter system. Currency has been used by countless civilizations throughout history and continues to be used to this day. Technology has influenced the rapid growth and acceptance of consumer credit purchases. Communications and database technology allow credit card companies to facilitate transactions anywhere in the world while keeping a centralized “tab” on their customers.

Considerations

Cash-and-carry operations do not always have a significant impact on consumers' spending habits, since credit cards are technically a form of up-front payment in the eyes of businesses. Credit card companies pay businesses promptly for their customers' transactions, regardless of whether the customer pays his bill. This creates a situation in which people can still make purchases on credit at cash-and-carry business by switching the debt to a third party. This tactic proves less effective, however, if credit card companies and other lenders impose stricter limits, less favorable interest rates and fee structures and tougher decision criteria for new accounts. This can happen in times of economic turmoil or record levels of credit card default. When this happens, consumers can find themselves face to face with the realities of cash-and-carry as their personal credit lines dry up or become too burdensome.

The Future

The credit market is in a constant state of evolution as it responds to events and issues in the larger macroeconomic and political landscape of nations around the world. If a large number of companies adopt cash-and-carry business models, and credit card companies adopt stricter policies, the situation could force consumers to make more frugal spending decisions, working within a budget and saving money for months or years before making large purchases. It is also possible, however, that if credit card companies adopt generous and liberal credit policies, the vicious cycle of debt and default may continue.

Effects

A return to a predominantly cash-and-carry marketplace could have a number of negative economic effects. Gross domestic product figures could decline as a result of reduced purchasing power and wiser spending habits. Unemployment could also rise to unprecedented levels due to leaner income statements in all industries.

About the Author

David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.